Saturday, June 07, 2008

Crisis? What Oil Crisis? Not in Russia!

The Economist -- There is one country where the high oil price is powering the expansion of the market, rather than painful restructuring. Thanks to abundant natural resources, Russia's economy has grown by an average of 7% a year for the past decade. Real disposable income has nearly doubled in the past five years and is growing by more than 10% a year. That means a lot of Russians can suddenly afford to buy cars.

High oil prices may be causing pain for carmakers in America, but they have helped create a booming market in Russia. Compared with other markets, burdened by debt and oil prices, “Russia is still magically isolated.”

The growth and size of the Russian market has confounded every forecast. In 2007 sales of new cars grew 36% by volume and, reflecting the steadily increasing buying power of customers, 57% by value. Sales of passenger vehicles exceeded 2.7 million (see chart above).

Russia could outstrip Germany as Europe's biggest market this year, with sales reaching around 3.3 million. By 2012 Russians will be buying more than 5 million new cars a year, of which nearly 90% will be foreign brands. With its big dealer network, Ford has done especially well: a decade ago it sold fewer cars in Russia in a year than it now sells in a week.